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🔷ANZ's New Zealand GDP Preview


  • We’ve pencilled in a respectable 1.2% q/q rise in Q2 GDP, but these data feel like old news given the return to level 4 lockdown in Q3.

  • The big picture: Q2 data should show the economy was on a solid trajectory before lockdown, but with some industries still struggling courtesy of the closed border. Q3 GDP (released December) will contract sharply, hopefully followed by a strong rebound in Q4. We learned from the last lockdown that provided the Government puts the bulk of lost production on its balance sheet, then underlying economic momentum should hold up through all the noise.

  • The annual current account deficit (released the day before GDP) is expected to widen as a share of the economy by 1.0%pts to 3.2%.

Overall, we expect the Q2 GDP data to show the economy was on a tear before Delta reared its ugly head, necessitating renewed lockdown measures. We think that strong momentum going into lockdown will be worth something coming out. But as we outlined in our recent Quarterly Economic Update, we’re going to see GDP thrown around a lot over the coming quarters, with a sharp drop in Q3 and, hopefully, a sharp bounce in Q4. Importantly, provided the fiscal response is just as potent as last time around, we think household incomes will hold up well through this lockdown too. Indeed, when it comes to gauging the impact of lockdowns on underlying economic momentum, production GDP is a bit of a red herring. Here, getting a handle on the income measures of GDP, and net household disposable income in particular, will be important. Lucky for us, Stats NZ are now releasing these data (in experimental form) on a quarterly basis, but with around a month’s delay from the production measure.

Turning to the details, the 1.2% q/q lift in production GDP is expected to reflect pretty broad-based strength across primary (up 1.0% q/q), goods (up 0.8% q/q) and services (up 1.4% q/q) industries. But while the aggregated cuts of data will look robust, particularly from a growth perspective, some industries continue to operate well below pre-crisis levels. Education and training and transport are expected to remain the weak spots in levels terms, as the closed border continues to weigh.


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